ZTE Gets Another Reprieve From US Sanctions
By Alex Lawson
Law360, New York (February 23, 2017, 6:42 PM EST) -- Nearly a year after it was first rapped for allegedly violating sanctions on Iran, Chinese telecom giant ZTE Corp. was given another reprieve by the U.S. government Thursday as the two sides continue to work on an agreement that will settle the allegations.
The U.S. Department of Commerce had effectively barred companies from doing business with ZTE and certain subsidiaries after discovering evidence of illicit tech sales to Iran. But after an outcry from others in the telecommunications supply chain, the government reversed course and issued a temporary license reopening trade with ZTE.
That license has been intermittently renewed so that Commerce’s Bureau of Industry and Security can work on hammering out a settlement with ZTE without causing a massive disruption in the market. The license was set to expire on Monday, but a Federal Register notice from BIS has pushed the deadline back to late next month.
“At this time, the U.S. government has decided to extend the temporary general license until March 29, 2017,” BIS said in its notice. “In order to implement this decision, this final rule revises the temporary general license to remove the expiration date of February 27, 2017, and to substitute the date of March 29, 2017.”
The notice does not give any update on the status of the settlement discussions or how soon ZTE and the government might forge an agreement, but the company has already warned its shareholders to expect penalties that will substantially affect ZTE’s bottom line.
“Shareholders and potential investors of the company are advised to pay attention to further announcements made by the company and investment risks,” ZTE said in a filing to the Hong Kong Stock Exchange on Feb. 10.
A spokesman for ZTE did not immediately respond to a request for comment on Thursday’s extension.
About a month before President Donald Trump took office, the ZTE matter was listed by his transition team as a potential “quick win” for the administration, suggesting that the end may be in sight. But thus far, there has been no indication of a resolution in the offing, and Commerce did not respond to a request for comment on the matter Wednesday.
It remains unclear exactly what stance the Trump administration will take with regard to ZTE. Throughout the campaign, the former real estate tycoon had blasted China on various trade fronts and voiced support for robust sanctions enforcement against Iran.
But Trump’s pick to head up Commerce, billionaire private equity investor Wilbur Ross, profiles as a sanctions-averse member of the business community, further clouding the economically and politically charged environment that accompanies the ZTE case.
--Editing by Emily Kokoll.
